Slower growth in U.S. jobs ripples through markets

September 3, 2021

By Huw Jones

LONDON (Reuters) – Weaker-than-expected jobs growth data from the United States sent a wave through the markets on Friday, leaving investors trying to work out what it means for the timing of Federal Reserve tapering of stimulus.

Non-farm payrolls increased by 235,000 jobs last month, far short of the 728,000 jobs expected by economists polled by Reuters, though estimates had varied widely and August payrolls have been subsequently revised higher in 11 of the last 12 years.

“Hourly wages took off and it looks to me as if wage inflation is not that far way,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

Investors were trying to gauge the timing of the Federal Reserve’s announcement on when it will start scaling back its massive monthly bond buying program.

Ahead of the opening bell on Wall Street, S&P 500 stock futures were little changed after initially gyrating on news of the payrolls data.

The dollar index, which measures the greenbackagainst six peers, was down 0.185% at 92.067, losing ground after the payrolls numbers.

U.S. treasuries had been cautious ahead of the payrolls, but the yield on benchmark 10-year Treasury notes initially climbed all the way to 1.3308% compared with its U.S. close of 1.294% on Thursday.

MSCI’s all-country world index, which had ended the previous session at its fifth consecutive closing high, inched up further by 0.15%.

The European single currency rose 0.2%. Markets are starting to react to the potential for more sustained euro zone inflation and reduced stimulus from the European Central Bank, which meets next week.

In Europe, data showed that euro zone business activity remained strong last month, despite fears about the Delta variant of the coronavirus and widespread supply chain issues.

The STOXX index of 600 European companies edged 0.3% lower, though still close to its record high of last month.

JAPAN JUMPS, CHINA EASES

Japanese shares jumped after officials said Prime Minister Yoshihide Suga would step down, setting the stage for a new premier after a one-year tenure marred by an unpopular COVID-19 response and rapidly dwindling public support.

Japan’s TOPIX stock index rose to a 30-year high and was last up 1.61%, with the Nikkei gaining 2%. Asian shares are still off their peaks from earlier in the year however, and lagging those elsewhere.

Meanwhile, Chinese blue chips were down 0.5% and Hong Kong was off 0.72% after activity in China’s services sector slumped into sharp contraction in August, a private survey showed on Friday, hurt by restrictions imposed to curb the COVID-19 Delta variant.

Oil prices were firmer, with U.S. crude gaining 0.7% to $70.45 a barrel. Brent crude rose 0.8% to $73.62 per barrel. [O/R]

Gold gained 0.9% to $1,824 an ounce.

(Additional reporting by Alun John in Hong Kong; Kevin Buckland in Tokyo; Editing by Stephen Coates, Mark Heinrich and Hugh Lawson)

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